Morning Commentary: Junk up ¼; CGG to price; ETFs see big inflows

By Paul A. Harris

Portland, Ore., April 13 – High-yield bonds were heading toward the weekend on a good footing with the market up ¼ point on Friday, a trader said.

High-yield ETFs were flat to slightly higher at mid-morning. The SPDR Blmbg Barclays High Yield Bd ETF (JNK) was up a nickel, or 0.14%, at $36.19 per share.

Energy prices – a sector that encompasses 15% of the high-yield index – were also better on the morning. The barrel price of West Texas Intermediate crude oil for May 2018 delivery was up 15 cents, or 0.22%, at $67.22.

Among recent issues, Drax Group Co.’s 6 5/8% senior secured notes due November 2025 (BB+/BB+) were turning in a strong secondary market performance at 101 5/8 bid at mid-morning, the trader said.

The $300 million notes priced at par on Thursday, at the tight end of yield talk in the 6¾% area.

Elsewhere, bonds priced on Tuesday by Hilton Worldwide Holdings, Inc. continue to trade well, the trader said.

The Hilton Domestic Operating Co. Inc. 5 1/8% senior notes due 2025 (Ba2/BB+) were 101 1/8 bid on Friday.

The massively upsized $1.5 billion issue (from $500 million) was priced at par on Tuesday amid massive demand, the trader remarked.

CGG oversubscribed

CGG Holding (US) Inc. launched its $650 million equivalent two-part five-year senior secured notes offering (B2/B) inside of price talk on Friday.

The deal includes $300 million of notes launched at 9%. Official price talk was in the 9¼% area. Initial guidance was in the high 9% area.

It also includes €280 million of notes launched at 7 7/8%. Official price talk was in the 8¼% area. Initial guidance was in the high 8% area to 9%.

Final commitments were due at 9 a.m. ET on Friday, and the deal, said to be playing to $2 billion and €2 billion of total demand, is set to price later on Friday.

Global coordinator Credit Suisse will bill and deliver for the dollar-denominated notes. Global coordinator JPMorgan will bill and deliver for the euro-denominated notes.

Thursday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Thursday, the trader said.

High-yield ETFs saw notable inflows of $568 million on the day.

Actively managed high-yield funds saw $70 million of inflows on Thursday.

News of those daily flows follows a Thursday afternoon report that the dedicated high-yield funds saw $989 million of inflows in the week to the Wednesday, April 11 close, only the second positive weekly flow in 13 weeks.

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